Federalism Rots Away Under King v. Burwell

The fallout from the latest Obamacare ruling, King v. Burwell, has carried on with all the typical stagecraft one would expect. Conservatives were quick to lambast the Supreme Court, vowing to redouble their repeal efforts. Meanwhile, liberals across the country crowed that “the Affordable Care Act is here to stay” and that conservatives should “move on.”

Time will tell which side walked away from last week’s decision smelling sweeter. I am just not certain the American public will be able to sense anything—what with cooperative federalism rotting dead in the corner. The majority opinion may have rescued the Affordable Care Act (ACA) from inept drafting. But, the majority also subverted the very components needed for cooperative federalism to halfway function as conduit of state sovereignty, much less as an expression of American subsidiarity.

There is a lot that can be said about cooperative federalism—most of it bad. The proffered funds entrap the states in a cycle of dependency. State legislators face almost irresistible pressure from constituents to accept federal funds. However, once that money has been incorporated into the state’s budget, either Congress or some federal agency can alter the terms of the agreement. States lack an easy replacement for the lost income and so end up bending the knee.

Nevertheless, for all its faults, cooperative federalism at least acknowledges the important role that states play in the implementation of social and economic policy. It recognizes that the states have an expertise and therefore invites them to exert real influence over how federal programs interact with their residents. Through cooperative arrangements, states enact their own laws. They create new institutions and pass new administrative regulations. In other words, they exercise significant sovereign powers even if it is in the service of what are more or less national programs.

The arrangement reminds me to some extent of what Pope John Paul II described in Centesimus Annus: “A community of a higher order should not interfere in the internal life of a community of a lower order . . . but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good.”

Cooperative federalism encroaches too much onto the states’ sphere of sovereignty. It absorbs the states into its own design instead of letting them truly decide when that help is wanted or needed, and on what terms. Yet, at the end of the day, it does employ the principle of subsidiarity in order to preempt the welfare state’s tendency to dominate the very men and women it sets out to serve, albeit imperfectly.

Thus, while many constitutionalists advocate for the eradication of cooperative federalism—myself among them—any change needs to be oriented towards giving greater independence to the states, not less.

King v. Burwell moves us in the wrong direction. It undermines the states’ ability to rely on federal statute and therefore prevents them from knowing how to tailor their response to a congressional call for action. That’s not to say uncertainty didn’t exist before. However, in years past, the federal government was bound to a reasonable interpretation of the law’s plain language when switching out the strings attached to federal funds. Thanks to the Chief Justice’s ingenuity as a wordsmith, that last tether has been cut.

The implications of this misstep are evident in the ACA itself. Like other ventures into social engineering, the new healthcare law demanded a huge investment on the part of participating states. Politico reported that Massachusetts, Oregon, Nevada, and Maryland spent a combined $474 million to set up their online exchanges. Each state was expected to spend millions more in order to fix crippling glitches on the marketplace websites.

Altogether, sixteen states took up the burden of establishing their own exchange, and they did so for a very specific reason. According to the ACA’s plain language, taxpayers only qualified for an individual tax credit if they enrolled in an insurance plan through “an Exchange established by the State.” The money spent therefore was a tradeoff. The states would assume the cost and responsibility of a healthcare exchange, but their residents would receive the subsidies that were needed to make the price of insurance palatable.

Justice Roberts’ so-called “jiggery-pokery” brought that deliberative bargain to a close. He reasoned that the provision really meant “all Exchanges—both Federal and State.” Every taxpayer qualified for a subsidy. It did not matter whether their home state set up an exchange, refused to cooperate on principle, thought the costs too high, or hoped that the lack of subsidies would sabotage the enforcement of the law’s insurance mandate. All responses to the ACA were treated the same by the Court, even when the text of the law made clear distinctions.

That was the long way of saying that the states wasted their money. They could have received the same benefits had they flat out rejected Congress’ call. They certainly would have been saved the public embarrassment that came from repeated website failures and low participation rates from their residents. Justice Roberts sought to recreate “a fair understanding of the legislative plan.” The states, however, were limited to the text, and they adapted their laws accordingly.

States must henceforth ask themselves whether they can risk being burned a second time. Legislative intent cannot offer the same certainty as found in the text of a statute. A legislative plan bends in different directions depending on the lawmaker in charge, and the means of accomplishing said plan change in response to conditions on the ground. The states cannot predict what mechanism will better advance Congress’ objective, so they’ll never know which responsibilities—or costs—they’ve consented to in advance.

As a result, the chances are that many states will be more hesitant to accept the next invitation to implement a federal scheme. Maybe that’s a good thing. The last few decades have demonstrated time and again that cooperative federalism allows the national government to sidestep its constitutional limits and intrude on the internal operations of the states.

The realist in me though recognizes that deterring the states in this way will not result in a setup more in line with either the Constitution or the principle of subsidiarity. Instead, the federal government, emboldened by Burwell, will seek even less cooperation with the states. It will shoulder ever more tasks when implementing its agenda, cutting the American public off from the greatest mitigator to federal overreach. Burwell did much to tear down cooperative federalism, but not in a way that restores state sovereignty.

The drawbacks of cooperative federalism have been well documented. Congress can now exert sweeping control over how Americans obtain healthcare, education, and housing, even though all things being equal poverty in these areas would be better served by families, communities, and in some cases the states. That said, cooperative federal at the very least attempts to bring the expertise of lower order communities into its work. Its ejection from the public square should not be at the expense of what virtues it possesses.